Mark D. Walters

Washington Employment Law Alert - Modify Your Form Offer Letter Now

8/15/2019

There are Big Changes Coming to Washington State Law on Non-Competition Agreements, and one of the changes is the requirement for employers to notify prospective new hires of the company's non-competition restrictive covenant before you hire them.

Here is draft language you can use; modify the red font to match the name of your company and the title of your Employment Agreement:

As a condition of Company Name making this offer of employment to you, on or before your date of hire, you are required to read and sign our Employee Non-Competition, Non-Solicitation, Confidentiality and Inventions Agreement (“Agreement’). A copy of the Agreement is provided with this offer letter. Please read this carefully. Please also note that, while the Agreement will be immediately enforceable in all respects should you accept our offer of employment by signing the Agreement and returning your signed copy to us, the non-competition covenant will only be enforced if, now or in the future, your annualized earnings, as reported in box one of your W-2, exceed $100,000.00, as adjusted annually based on CPI-U inflation after January 1, 2020.

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Big Changes Coming to Washington State Law on Non-Competition Agreements

5/16/2019

When Governor Jay Inslee signs HB 1450, which is 100% expected, Washington State law governing non-competition agreements will shift significantly pro-employee and pro-independent contractor. Once signed by Governor Inslee, this law will become effective on January 1, 2020.

The very first section of HB 1450 sets the tone: "The legislature finds that workforce mobility is important to economic growth and development [and] that agreements limiting competition or hiring may be contracts of adhesion that may be unreasonable."

HB 1450 defines a non-competition covenant to include "every written or oral covenant, agreement, or contract by which an employee or independent contractor is prohibited or restrained from engaging in a lawful profession, trade, or business of any kind." (Note the inclusion of both written and oral agreements in this very broad definition; see exclusions at the Note below).

Under this upcoming law:

there exists a reputable presumption that non-competition agreements running longer than 18-months from the separation date, are unreasonable and unenforceable unless the employer can demonstrate by clear and convincing evidence that a longer duration is necessary to protect its business or goodwill;
non-competition agreements cannot be enforced against an employee who earns less than $100K annually or an independent contractor that is paid less than $250K annually) based on Box 1 of the employee's W-2 or the contractor's IRS Form 1099. (These figures to be adjusted for inflation, further complicating matters).

Under this new statute, employee non-competition agreements are void and unenforcible unless:

the employer discloses to the new-hire in writing the terms of the non-competition agreement at the time the offer of employment is presented to the new hire (in other words, provide a full copy at the time of the offer letter);
if the employer requires the new-hire to enter into an employee non-competition agreement that will become effective if the employee's compensation crosses the $100K annual threshold, the employer must disclose in writing that it may be enforceable in the future (in other words, add this to the standard form employee non-competition agreement);
if the employee non-competition agreement is entered into the after the new-hire's start date, it must be supported by new and independent consideration;
if an employer pursues an enforcement action against an laid-off employee subject to an non-competition agreement (i.e. earns more than $100k), and the employer pursues an enforcement action, the employer must continue to pay the laid-off employee compensation equal to his or her base salary, less income earned from the laid-off employee's new employer.

For Washington based employees and independent contractors, non-competition covenants are void if they require adjudication outside of Washington or deprive the person of the protections under the
new law.

This new law includes the following remedy provisions, which are very pro-employee and pro-independent contractor:

if a court or arbitrator determines that a non-competition covenant violates this chapter, the violator must pay the aggrieved person the greater of his or her actual damages or a statutory penalty of five thousand dollars, plus reasonable attorneys' fees, expenses, and costs incurred in the proceeding;
if a court or arbitrator reforms, rewrites, modifies, or only partially enforces any non-competition covenant, the party seeking enforcement must pay the aggrieved person the greater of his or her actual damages or a statutory penalty of five thousand dollars, plus reasonable attorneys' fees, expenses, and costs incurred in the proceeding.

Thus, even in cases where the court or arbitrator modifies, or blue pencil's the agreement, the employer is still on the hook for paying statutory remedies.

Once signed, this law will become effective on January 1, 2020; however, it can be retroactively applied to non-competition agreements that were entered into before January 1, 2020, under two circumstances:

first, this new law cannot be used in in legal action that is commenced before January 1, 2020.
second, a cause of action may not be brought regarding a competition agreement signed prior to January 1, 2020, if the non-competition covenant is not being enforced (appears to mean this new law cannot be used by an employee plaintiff seeking a declaratory judgment when the employer is not seeking enforcement).

Note: The following are excluded from the definition of a non-competition covenant:

non-solicitation clauses that restrict employees from soliciting remaining employees and current customers (thus, all is not lost as the new law will continue to allow employers to protect their established customer relationships);
restrictive covenants prohibiting the use or disclosure of trade secrets or inventions;
restrictive covenants between persons buying or selling the goodwill or assets of a business.

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What Proof is Required in a Tortious Interference with a Business Expectancy Case

5/3/2019

A plaintiff must prove the following five elements in a tortious interference with a business expectancy case: (1) the existence of a valid business expectancy; (2) that the defendant had knowledge of that business expectancy; (3) an intentional interference inducing or causing termination of the expectancy; (4) that the defendant interfered for an improper purpose or used improper means; and (5) resultant damage.

Element One: Existence of a Business Expectancy: This first element requires proof of something less than an enforceable contract, though a contract is often involved (i.e. non-competition or non-disclosure agreement). For instance, a prospective contractual or business relationship that would be of economic value such as an prospective customer, vendor or supplier. Here, you only have to show that the future business opportunity is a reasonable expectation and not merely wishful thinking.

Element Two: Knowledge of the Expectancy: The second element requires only for the defendant to have known of facts giving rise to the presence of the business expectancy, and the facts need to show the defendant had awareness of “some kind of business arrangement.”

Element Three: Intentional Interference Inducing or Causing a Breach or Termination of the Expectancy: For the third element, you need to show that the defendant desired to bring it about or that the defendant knew that the interference was certain or substantially certain to occur as a result of the defendant’s action.

Element Four: Interfered with Improper Means: On this forth element, you need to show that the defendant acted with improper motive, improper means, or both.” Improper means,” means the defendant had a duty not to interfere. To establish such a duty, the plaintiff may point to a restrictive covenant in a contract, a statute, regulation, recognized common law, or established standard of trade or profession.

Element Five: Resultant Damage: In all cases, the plaintiff must prove damages with reasonable certainty. This means you must produce evidence sufficient to support the claim that allows a reasonable basis for estimating the without mere speculation or conjecture.

For my lawyer and law student followers, here are a few cases on point:

Pac. Nw. Shooting Park Ass'n, 158 Wn.2d 342, 350, 144 P.3d 276 (2006).
Scymanski v. Dufault, 80 Wn.2d 77, 83, 491 P.2d 1050 (1971).
Newton Ins. Agency & Brokerage, Inc. v. Caledonian Ins. Grp., Inc., 114 Wn. App. 151, 52 P.3d 30 (2002).
Life Designs Ranch. Inc. v. Sommer, 191 Wn. App. 320, 364 P.3d 129 (2015)
Calbom v. Knudtzon, 65 Wn.2d 157, 165, 396 P.2d 148 (1964).
Pleas v. City of Seattle, 112 Wn.2d 794, 804-05, 774 P.2d 1158 (1989).

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Commercial Lease Law: Equitable Grace Period to Avoid Inequitable Forfeiture

4/24/2019

Commercial leases are typically very one sided; pro landlord with the landlord dictating the terms and conditions of the lease. Commercial leases often allow the tenant to renew the lease for an additional agreed upon term or terms, provided the tenant follows the notice of intent to renew process and deadlines in the commercial lease.

What happens if the tenant fails to follow the notice of intent to renew process and deadlines in the commercial lease? In most cases, the tenant will be out of luck and lose the lease because the general rule is that an option to renew commercial lease clause is strictly construed and must be exercised in a timely manner. Thus, this could result in eviction, or the landlord requiring the tenant to enter into a new commercial lease. However, there might be another option under the right circumstances if, in my experience, the landlord is attempting to evict the tenant: the tenant may be entitled to an equitable grace period, which (if successful) will save the tenant from its failure to follow the notice of intent to renew process and deadlines and reinstate the commercial lease.

There is a handful of cases on this in Washington State, and Washington State appears to be in the minority on the commercial lease equitable grace period/inequitable forfeiture doctrine. For my lawyer and law student readers, I list the lead cases below.

When presented with a commercial lease equitable grace period/inequitable forfeiture doctrine case, our Courts look to the following factors: (1) whether the failure to give timely notice was purely inadvertent or was the result of intentional, culpable, or grossly negligent conduct; (2) whether an inequitable forfeiture would result if equity does not intervene; (3) whether the tenant's failure to give timely notice resulted in the landlord changing its position in any way, and whether the landlord was prejudiced thereby; (4) whether the lease was for a long term, not a short term; and (5) whether there was undue delay in the tenant giving notice.

Commercial lease equitable grace period/inequitable forfeiture cases are factually dense and highly factually dependent. And, like all lawsuits, there will be a tremendous amount of uncertainty to manage. If you are a landlord considering eviction because your commercial tenant failed to exercise its option to renew the lease on time, or a tenant facing and eviction because you missed the deadlines, I would be happy to talk to you.

Washington State Commercial Lease Equitable Grace Period/Inequitable Forfeiture Cases:
Wharf Rest., Inc. v. Protective Order of Seattle, 24 Wn. App. 601, 605 P.2d 334 (1979)
Heckman Motors v. Gunn, 73 Wn.App. 84, 867 P.2d 683 (1994)
Recreational Equip., Inc. v. World Wrapps NW., Inc., 165 Wn. App. 553 (2011)

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Strict Liability for Operators of Places of Public Accommodation Under the Washington Law Against Discrimination

1/31/2019

In a landmark decision (01/31/2019), the Washington State Supreme Court held that employers are strictly liable under the Washington Law Against Discrimination for their employee's discriminatory conduct towards a customer in a place of public accommodation.

The Washington Law Against Discrimination (WLAD) makes it unlawful for "any person or the person's agent or employee to commit an act [of] discrimination . . . in any place of public . . . accommodation." RCW 49.60.215.

A place of public accommodation includes places where charges are made for admission like a sports stadium and theatre, places where medical services are made available like a hospital, and places where the public gathers for amusement, recreation, or public purposes.

The WLAD provides for the right to "full enjoyment" of any place of public accommodation, including the right to purchase any service or commodity sold by any place of public accommodation "without acts directly or indirectly causing persons of [a protected class] to be treated as not welcome, accepted, desired, or solicited." See RCW 49.60.040(14). Similarly, WLAD prohibits "any person or the person's agent or employee [from committing] an act which directly or indirectly results in any distinction, restriction, or discrimination" based on a person's membership in a protected class. RCW 49.60.215 (emphasis added).

In order to establish discrimination under the WLAD in a public accommodation scenario, a plaintiff must prove that (1) the plaintiff is a member of a protected class, (2) the defendant's establishment is a place of public accommodation, (3) the defendant discriminated against the plaintiff when it did not treat the plaintiff in a manner comparable to the treatment it provides to persons outside that class, and (4) the plaintiff s protected status was a substantial factor that caused the discrimination. See Fell v. Spokane Transit Auth., 128 Wn.2d 618, 637, 911 P.2d 1319 (1996); see also Demelash v. Ross Stores, Inc., 105 Wn. App. 508, 525, 20 P.3d 447 (2001).

Our State's High Court wrote:

The "WLAD protects the customer's "full enjoyment" of the services and privileges offered in public accommodations. RCW 49.60.030(1)(b). WLAD's broad definition of "full enjoyment" extends beyond denial of service to include liability for mistreatment that makes a person feel "not welcome, accepted, desired, or solicited." RCW 49.60.040(14). Denial or deprivation of services on the basis of one's protected class is an affront to personal dignity. See Obergefell v. Hodges, _ U.S. _, 135 S. Ct. 2584, 2604, 2607-08, 192 L. Ed. 2d 609 (2015) (denial of marriage equality works a "grave and continuing harm"). The "fundamental object" of laws banning discrimination in public accommodations is "to vindicate 'the deprivation of personal dignity that surely accompanies denials of equal access to public establishments."' Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 250, 85 S. Ct. 348, 13 L. Ed. 2d 258 (1964) (quoting S. REP. No. 88-872, at 16-17 (1964)).

WLAD makes it unlawful for "any person or the person's agent or employee to commit an act" of, among other things, discrimination in a place of public accommodation. RCW 49.60.215. This provision imposes direct liability on employers for the discriminatory conduct of their agents and employees."

Thus, the Court held that the employer will be strictly liable if its employee caused the harm prohibited by the WLAD, even if the employer entity did not participate in the discrimination and was not negligent in training or supervising its employees.

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Remembering Martin Luther King, Jr. - Letter from a Birmingham Jail

1/21/2019

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Freeze Your Credit Report

8/13/2018

How we let this happen is another story, but we all "do business" with the major consumer credit reporting companies, Equifax, Experian and TransUnion. In this crazy world of identity theft and hacking of companies that hold our confidential consumer financial information, a good and free step to protect against identify theft is to freeze your credit report with all of the major consumer credit scoring companies. I recommend that everyone do this today.

The links are below:

This will help prevent identity thieves stealing from you by borrowing money under your financial credentials.

Do this now.

Contact Mark D. Walters

Types of Online Contracts

8/2/2018

Judge Weinstein of the District Court for the Eastern District of New York has described the four general types of online contracts. These are: (1) Browsewrap; (2) Clickwrap; (3) Scrollwrap; and (4) Sign-in-wrap agreements. Berkson v. Gogo LLC, 97 F. Supp. 3d 359, 394-402 (E.D.N.Y. 2015). Briefly summarized:

Browsewrap agreements "can take various forms but basically the website will contain a notice that—by merely using the services of, obtaining information from, or initiating applications within the website—the user is agreeing to and is bound by the site's terms of service." United States v. Drew, 259 F.R.D. 449, 462 n.22 (C.D. Cal. 2009). Because of the passive nature of acceptance in browsewrap agreements, courts closely examine the factual circumstances surrounding a consumer's use. "Despite their ubiquity, browsewrap agreements are still relatively new to courts." Be In, Inc. v. Google Inc., No. 12-CV-03373, 2013 U.S. Dist. LEXIS 147047, 2013 WL 5568706, at *7 (N.D. Cal. Oct. 9, 2013). For an internet browsewrap contract to be binding, consumers must have reasonable notice of a company's "terms of use" and exhibit "unambiguous assent" to those terms. Specht, 306 F.3d at 35; see also Be In, 2013 WL 5568706, at *6-8 (collecting cases).

Clickwrap agreements "necessitate an active role by the user of a website. Courts, in general, find them enforceable. Drew, 259 F.R.D. at 462 n.22. "Clickwrap agreements require a user to affirmatively click a box on the website acknowledging awareness of and agreement to the terms of service before he or she is allowed to proceed with further utilization of the website." Id. By requiring a physical manifestation of assent, a user is said to be put on inquiry notice of the terms assented to."

Scrollwrap agreements requires users to physically scroll through an internet agreement and click on a separate "I agree" button in order to assent to the terms and conditions of the host website.

Sign-in-wrap agreements couples assent to the terms of a website with signing up for use of the site's services.

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How Courts Look at Statutes Statutory Construction Rules

8/2/2018

The following list are some of the rules courts apply when construing statutes in legal disputes, with citations for my law student and legal professional readers.

The court's first priority in statutory interpretation is to "ascertain and carry out the Legislature's intent." Dep't of Ecology v. Campbell & Gwinn, LLC, 146 Wn.2d 1, 9-10, 43 P.3d 4 (2002).
To determine the legislature's intent, courts first look to the statute's plain language, which it may discern from what the legislature has said in the statute and related statutes which disclose legislative intent about the provision in question. Skagit County Pub. Hosp. Dist. No. 1. v. Dep't of Revenue, 158 Wn. App. 426, 437, 242 P.3d 909 (2010).
To interpret a statute's plain language, the courts examine the text of the statute, "as well as 'the context of the statute in which that provision is found, related provisions, and the statutory scheme as a whole.'" State v. Larson, 184 Wn.2d 843, 848, 365 P.3d 740 (2015).
If the plain language is subject to only one interpretation, the court's inquiry ends because plain language does not require construction.” Skagit County, 158 Wn. App. at 437.
If there is not a statutory definition, court's give the words in the statute their common and ordinary meaning. To determine the plain meaning of an undefined term, we may look to the dictionary.” Skagit County, 158 Wn. App. at 437.
When a statute is susceptible of more than one reasonable interpretation, court's defer to the agency's interpretation of the statute if that interpretation does not conflict with the statutory language and is within the agency's expertise.” New W. Fisheries, Inc. v. Dep't of Revenue, 106 Wn. App. 370, 377, 22 P.3d 1274 (2001).
Courts cannot interpret a statute in a manner that leads to an absurd result. Estate of Bunch v. McGraw Residential Ctr., 174 Wn.2d 425, 433, 275 P.3d 1119 (2012).

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How to Know if You Might be Over-Paying for legal Services

7/31/2018

mMost business owners and executives are at a real disadvantage when it comes to selecting a law firm. They know many of the large law firm players and have reason to trust the skills and reputations of these big firm lawyers. However, they also know that part and parcel with the big law firm lawyer, is high prices to support the big law firm overhead.

How do you know if you might be over-paying for legal services?

The lawyer has a better view from his or her lobby than the view from your lobby.
The law firm is located in the high rent downtown business core of a major U.S. city.
There are more employees at the law firm than employees in your company.
The lawyer has more support staff than you do.
The law firm's art collection looks expensive.
Senior lawyers at the law firm can take a paid sabbatical.
The law firm has more offices/locations than your company.

I could add to this list, but you get the point.

Part of what you pay for when you hire a lawyer, is the lawyer's law firm overhead, and to be honest, most lawyers do not need that much overhead to deliver high quality legal work.

Most businesses would be better served by working with experienced attorneys who work at smaller, lower overhead, law firms form some if not all of their legal work.

Yes, like mine.

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